The sudden halt imposed on the aviation industry by the COVID-19 crisis hit the sector hard. In April 2020, two-thirds of the global commercial aviation fleet sat idle on the tarmac, while passenger traffic was down 90% year-on-year. Today, the aviation industry is slowly rebounding, led by domestic travel. As more aircraft return to the skies, a new report from aviation insurer Allianz Global Corporate & Specialty (AGCS) highlights some of the challenges airlines and airports face as they restart operations.
1. “Rusty” pilots and the return of sightseeing flights
Earlier this year, dozens of pilots reported making mistakes, such as taking multiple attempts to land, to NASA’s Aviation Safety Reporting System, with many citing rustiness as a factor on returning to the skies. Airlines (and other operators) are well aware of the potential for pilot “rustiness” and continue to take steps to manage and mitigate these risks.
Major airlines have developed different training programs for pilots re-entering service, depending on the length of absence. At a time of such unprecedented activity, it is comforting to know that the risk management processes that made airline travel safer than any form of travel prior to the pandemic will continue to drive an unparalleled travel safety environment in the post COVID-19 world.
However, the return of sightseeing flights in tourism destinations could lead to an uptick in risk for smaller leisure aircraft, including helicopters, particularly if there is an influx of new pilots unfamiliar with the routes and terrain. There have already been a number of fatal accidents involving sightseeing flights in recent years.
2. “Air rage” incidents
Unruly behavior of airplane passengers is increasingly a concern, particularly in the U.S. In a typical year, there are around 150 reports of passenger disruption on aircraft. By June 2021, there had been 3,000 just this year, according to the Federal Aviation Administration – the majority involving passengers refusing to wear a mask. The report notes that unruly passengers may later claim they were discriminated against by the airline in these cases even when in the wrong – a trend insurers need to stay on top of.
3. Perils from parked fleets
Although a large proportion of the world’s airline fleet have been – and are still – parked during COVID-19, loss exposures do not disappear. They change. Parked fleets are exposed to weather events. There have been numerous incidents of grounded aircraft being damaged by hailstorms and hurricanes.
The risk of shunting or ground incidents also increases, which can bring costly claims. There were a number of collisions at the start of the pandemic as operators transferred aircraft to storage facilities. More are likely when aircraft are moved again ahead of reuse.
Aircraft in storage typically undergo regular maintenance to ensure they are ready to return. However, never has the industry seen so many aircraft temporarily put out of service, and the report notes that smaller airlines may face significant challenges when reactivating fleets, given that it will be an unprecedented process.
See also: How COVID Alters Claims Patterns
4. Pilot shortage
Odd as it may seem given the impact of COVID-19, but the global aviation industry faces a pilot shortage in the mid- to long term. The tremendous increase in air travel pre-pandemic – annual air passenger growth in China alone was 10%-plus a year from 2011 – meant pilot demand was already outstripping supply. More than a quarter of a million are required over the coming decade.
Some airlines are building their own pilot pipelines by establishing flight schools. Given the nature of training, flying schools are prone to accidents, and claims are becoming more expensive with rising values of aircraft and increased activity. Landing accidents are most common, but insurers have also seen total losses.
5. New generation aircraft
A number of airlines have shrunk their fleets or retired aircraft over the past year, as the pandemic hastens a generational shift to smaller aircraft, given the anticipated reduced number of passengers on aircraft in the short-term future.
Newer-generation aircraft bring safety and efficiency benefits, but new materials such as composites, titanium and alloys are more expensive to repair, resulting in higher claims costs.
6. Robust performance by air cargo
Although passenger travel has been devastated by the pandemic, other aviation sectors have performed more robustly, such as cargo operators. In April 2021, Asia Pacific reported its best month for international air cargo since the pandemic began, thanks to rising business confidence, e-commerce and congestion at sea ports, while Latin America to North America freighter capacity grew by almost a third in May 2021 compared with the same two-week period in 2019. The report expects air cargo to continue to perform strongly.
7. Business travel – boom or bust?
Pre-COVID-19 business travel traffic amounted to $1.5 trillion a year, or around 1.7% of global GDP. With many airlines dialing back expectations in the short term, the report asks whether those days are over. New ways of collaboration, such as video calls, proved to be effective, and more companies are aiming to reduce business travel to improve their carbon footprint. Therefore, while there will be initial surge once lockdowns end, many airlines are preparing for a long-term paradigm shift in traveling, with business travel expected to be slow to pick up.
However, what speaks for a possible uptick is that some areas of business aviation have proven resilient during the pandemic. Companies that had aircraft continued to use them, while many that had never purchased or chartered an aircraft before did so for the first time. Many charter companies thrived.
8. New routes in Europe and Asia Pacific
Over 1,400 new air routes are scheduled for 2021 – more than double those added in 2016 – driven by Europe (over 600) and Asia Pacific (over 500), with regional airports set to be the main beneficiaries. Growth in China’s domestic market alone has seen over 200 routes added – almost the same as the U.S.
9. Insect infestations
There have been a number of reports of unreliable airspeed and altitude readings during the first flight(s) after some aircraft have left storage. In many cases, the problem was traced back to undetected insect nests inside the aircraft’s pitot tubes, pressure-sensitive sensors that feed data to an avionics computer. Such incidents have led to rejected takeoffs and turn-back events. Contamination risk increases if storage procedures are not followed.
See also: Pressure to Innovate Shifts Priorities
COVID-19 claims impact
The report also notes the aviation industry has seen relatively few claims directly related to the pandemic to date. In a small number of liability notifications, passengers have sued airlines for cancellations/disruptions.
AGCS analysis of more than 46,000 aviation insurance claims from 2016 to year-end 2020 worth more than EUR 14.5 billion (US$17.3 billion) shows collision/crash incidents account for over half the value of all claims. Other expensive causes of loss include faulty workmanship/maintenance and machinery breakdown.